S&P puts James River Coal on negative watch

BenFox

Standard & Poor's Ratings Services placed James River Coal Co.'s
JRCC
junk-level rating on watch for a downgrade, saying the coal producer will likely see weaker operating performance due to softening demand for thermal coal.

S&P rates the company's credit at a B, five notches below investment-grade territory.

Shares were recently down 5.3% at $5.78. The stock has fallen 15% over the past three months as the coal sector has struggled with stagnant U.S. demand and increased environmental regulations.

S&P added that warmer-than-normal winter weather and persistently low natural gas prices are hurting demand for thermal coal, and as a result, the company's 2012 operating performance may come in weaker than S&P previously expected.

The coal producer completed its acquisition of privately held International Resource Partners LP in April, expanding its presence in the market for high-margin metallurgical coal used in steelmaking. Though James River has posted weaker results in recently quarters due to acquisition-related costs, the company had benefited from colder-than-usual weather in Europe and a global manufacturing rebound. Furthermore, Asia continues to boost demand for metallurgical coal.

In November, the company reported a surprise third-quarter loss as higher input costs outweighed a jump in revenue and Central Appalachia coal shipments.

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